What is the journal entry format used to accrue interest expense?

Accruing interest expense involves recognizing the expense that has been incurred but not yet paid, which reflects the matching principle in accounting where expenses are recorded in the period they are incurred.

When a company incurs interest expense, it needs to record that expense in the accounting period it belongs to, regardless of whether the cash payment has been made. The journal entry for accruing interest expense requires a debit to Interest Expense, which increases the expense account and reflects the cost of borrowing for that period. Simultaneously, a credit is made to Interest Payable, which recognizes a liability for the amount of interest that is owed but not yet paid. This accurately represents the obligation to settle that expense in the future.

By recording this adjustment, the financial statements will provide an accurate portrayal of the company’s financial position and performance, ensuring that expenses are matched with the revenues they help generate during that period.